Chinese Fashion Consumers: Is my strategy for reaching the Chinese market, still fit for purpose?
By Selena Wu
As Covid-19 spread across the world, an ugly phenomenon followed in its wake. Racism against people of East Asian appearance reared its head, [1] both in subtle and overt ways, publicly and privately all over the world. Whilst many people were quick to condemn these incidents, this disappointing experience combined with the inaction of the UK government and institutions in the early stages of Covid-19 [2] reaching our shores, have left their mark on the Chinese community.
As China’s draconian measures appeared to have effectively contained the outbreak in Wuhan, Chinese national pride has been boosted [3]. At the same time overseas Chinese students were becoming victims of racist attacks and many Western countries cast doubt on the Chinese success and started to blame China for the outbreak. When China started to open its economy again, all this sentiment combined to change the perception of Chinese consumers, who started to become more inward looking. This is likely to be disastrous for the UK’s retail sector, as Chinese tourists are extremely valuable, spending a total of £1.7bn on trips to the UK in 2019 [4] and averaging £1,630 per shopping trip in the West End [5] . Even more worrying, only 27% of Chinese students [6] who have applied to study in the UK next year have confirmed they would still want to come, with 22% likely to cancel their plans and the remainder undecided. Chinese students studying overseas, spend more than $100,000 a year [7] as well as receiving on average three visitors from home each year, helping to drive tourism. Luxury retail in particular would be highly affected as the Chinese purchase 70% of their luxury goods abroad.
Chinese consumers are a hugely important market, currently accounting for a third of the world’s consumption of luxury goods [8], spending a total of $115bn in 2018 alone. This amount is expected to double by 2025, accounting for 40% of the projected world spend and driving the majority of growth. For UK luxury retail, Chinese customers account for 27% of ‘elite’ shoppers [9] (those that spend on average €35,000 per trip), whilst revenue from Chinese customers is a hugely important source of income for luxury department stores in the UK. Now as the government recently announced, arrivals to the UK will be required to quarantine from 8 June and, combined with the understandably chilly reception to the Western and UK actions, has caused a massive headache for the fashion and luxury retail sector (which is due to open stores the week after.)
Even in China, where the economy has appeared to bounce back and brands have achieved near normal sales figures at this time of year [10], the recovery is superficial. Many brands announced price rises to take place in March and April [11], artificially increasing demand before the rises took effect. In addition, for the first time in China luxury consumer sentiment weakened [12], with the majority of people declaring that they were less likely to spend on luxury than before, likely due to the uncertain worldwide economic environment and predicted growth being lowered by the government of China.
As the Chinese consumer changes their behaviour in subtle, but significant ways, brands need to ask themselves, ‘Is my strategy for reaching the Chinese market, fit for purpose?’. For any luxury or fashion brand these days, the key to growth is undoubtedly to reach this market, being such a significant proportion of the worldwide spend and driver of growth.
This means that brands now need to meet the Chinese customer in the middle. Practical steps to reach the consumer on native platforms and territory must be taken, such as implementing AliPay and WeChat Pay (90% of Chinese tourists would use mobile payments for overseas shopping given the option [13]). Whilst e-commerce is hugely popular in China for the purchase of luxury goods— the vast majority of these still take place offline, as Chinese customers value the experience and authenticity of the interactions. Brands need to have a physical retail presence in China, whether that is owning stores or working closely with retail partners and ensure that this is carefully planned as each region and city in China has a distinct culture and customer that have different aspirations to cater to. Brands also need to consider their digital experiences and e-commerce – Chinese consumers are most likely to use digital sources for brand discovery, and e-commerce through JD.com and Tmall would allow brands to reach consumers through a trusted name.
International brands would do well to take advantage of Chinese customers trust of Key Opinion Leaders (KOLs), the Chinese equivalent of our influencers. KOLs command audiences on par with the biggest celebrities in China and almost all Chinese luxury consumers say they get information about new brands from KOLs. Working with carefully selected KOLs has been an effective strategy for brands, through projects including collaborations, social media takeovers and physical events. Working with KOLs allow brands to market with authenticity, when treating the project as a partnership and utilising the KOL’s understanding of their follower base. KOLs are also accessible to brands that have a regional presence within China, as below the highest tier of KOLs who are recognised throughout China, local KOLs still command huge followings and trust.
Finally, brands need to ensure that they work carefully to make sure they fully understand the values, hopes and aspirations of the Chinese consumer and treat them with respect. In recent years, many of the strategies on play have shown a startling lack of understanding of the consumer. Major brands have being on the receiving end of Chinese consumer’s ire as incidents by brands, such as Dolce & Gabbana’s ‘eating with chopsticks’ campaign [14] and Burberry’s ‘creepy’ Chinese New Year advertising [15] , led to rapid backdowns as boycotts and damaging articles spread, causing damage to both image and revenue. Chinese consumers now understand their power to command change in brands behaviours and are no longer happy to be passive in the face of disrespectful actions. The most effective campaigns and successful brands have been the ones that have communicated their authentic stories, without pandering to their perceived image of the Chinese consumer.
For luxury fashion, the key to growth will be the ability to access the Chinese market. Brands now need to pivot their strategies and start to authentically understand the Chinese consumer— as they’ve become less likely to come back to our territory in the wake of how we have dealt with the Covid-19 pandemic.
Selena Wu is a consultant working with fashion brands, helping them to elevate their image, develop their sales and marketing and refine their direct-to-consumer strategies. She is passionate about sustainable business models and enjoys working closely with management to realise the full commercial potential of brands at all stages of growth. To get in touch with her, you can drop her a line at selena@mise-en-seine.com or find her on Instagram @wu.selena
References:
[1] https://www.timeshighereducation.com/news/chinese-students-uk-report-increased-racism-and-discrimination
[2]https://www.nytimes.com/2020/03/21/world/europe/coronavirus-chinese-students-uk.html
[3]https://www.businessoffashion.com/articles/professional/patriotic-consumers-are-changing-the-chinese-market-heres-how
[4]https://www.visitbritain.org/markets/china
[5]https://ww.fashionnetwork.com/news/Chinese-tourists-continue-to-boost-uk-fashion-as-eu-visitor-numbers-drop,1064248.html
[8]https://www.mckinsey.com/~/media/mckinsey/featured%20insights/china/how%20young%20chinese%20consumers%20are%20reshaping%20global%20luxury/mckinsey-china-luxury-report-2019-how-young-chinese-consumers-are-reshaping-global-luxury.ashx
[11]https://www.businessoffashion.com/articles/professional/why-luxury-brands-are-raising-prices-in-a-pandemic
[12]https://www.businessoffashion.com/articles/professional/revenge-buying-in-china-wont-save-luxury
[13]https://www.nielsen.com/cn/en/insights/report/2018/nielsen-over-90-percent-chinese-tourists-would-use-mobile-payment-overseas-given-the-option/
[14]https://www.businessoffashion.com/articles/news-analysis/assessing-the-damage-after-the-dolce-gabbana-uproar-racism-china
[15]https://www.businessoffashion.com/articles/professional/escaping-the-wrath-of-chinas-netizens-versace-coach-givenchy-hong-kong-taiwan